CTA Case No. 1770 (Resolution)

1t<~rUBLIC OJ' THE PBtLIPPINEI COURT OF TAX APPEALS QUEZON CITY U. S. T. COOPERATIVE , CTA CASE NO . 1770 Petitioner , � versus THE COMMISSIONER OF INTERNAL HEVE NUE , Respondent . X- - - - - - - - - X RE S 0 L UT I 0 N Petitioner appealed from the decisi on of re - spondent denying petiti oner ' s claim for refund of the sum of ~6 , 886 . 00 allege dly paid erroneous - ly as income taxes . Respondent , among other things , raised a jurisdictional question alleging that the peti tion for review was filed after the two- year period for actions for refunds provided in sec- tion 306 of the Tax Code had elapsed . This r e- solution refers to this point which the parti es submit before proceeding with the trial on the merits. It appears that petitioner is a cooperative association duly or ganized and exis ting under and by virtue of the laws of the Philj.ppines . �In a letter of October 14, 1958 petitioner claimed that it is exempt from all taxes and goverrunent fees under Republic Act No . 2023 , and for this

RESOLl:J"TION - CTA CASE NO. 1770 2 reason it requested ttpermission for non- payment. of the second installment of our income tax for the fiscal year ending }~rch 31, 1958 and taxes due and will be due . n At the same time , peti- tioner t1reserved the right to claj.m the refund of all taxes and fees due and paid after the effect ivity of said Act - June 22 , 1957 . '1 On October 20 , 1958 , the Commissioner of Internal Re- venue answered that petitioner ' s "f i nancial state- ment which lias been certified by 11r . Constantino S . de la Pefia , Certified Public Accountant , shows that your total net assets amount to F:388 , 561 . 32, 11 and according to respondent petitioner is tax- exempt under section 66 of Republic Act 2023 . In a letter of November 7, 1958 petitioner expressed "intention to apply for refund. of all the taxes paid from the effectivity of said Act , June 22 , 1957 � � � , 11 and at the same time requested opinion on the feasibility of fili ng ttan amended return for the taxable period April 1st to June 21 , 1957 . tt The aforesaid letter of November 7, 1958 was obviously taken by the Commissioner as a claim for refund for on October 20, 1960 and in answer to same the Commissioner denied the refund of "all fixed , percentage and residence taxes paid by

RESOLUTION - CTA CASE NO . 1770 3 petitioner during the per i od from June 22 , 1957 to Sept ember 19 , 1958 in the to t al sum of ~39 , 390 . 50 on the fnllliowing ground: Pursuant to the prov1.s1ons of section 66 of Republic Act No . 2023 under which you claim exemption from the payment of the taxes sought to be refunded, only non- agricultural coop- eratives registered under the said act with net assets of not more than ~5oo , ooo . oo are entitled to claim exemption from the payment of all internal revenue taxes . While it is true that as per certification dated October 7, 1958 of the Administrator, Cooperative Ad- ministration Office you are deemed to have been registered under Rep- ublic Act No . 2023 pursuant to sec - tion 4 thereof , yet , a careful perusal of your financial statements for the years ending I1arch 31, 1958 and Harch 31 , 1959 disclosed that you are dis - qualified to enjoy the tax- exemption privileges granted therein it appear- ing that your net assets (gross assets less reserves for depreciation) for the abovestated taxable years amounts to more than �500 , 000 . 00 . In vie\>! thereof, your above re- quest for refund bas to be , as it is hereby, denied . And in a letter of April 29 , 1966 , the Commissioner, also in answer to said letter of November 7, 1958, denied the refund of income taxes ~a id for the fiscal year ending March 31, 1958 in the sum of �6,886 . 00 in the following language:

RESOLUTION - CTA CASE NO . 1770 4 T In connection with your claim for refund of alleged erroneously paid in- come tax for the fiscal year ended ~arch 31, 1958 , in the sum of �6 , 886 . 00, I have the honor to inform you that / after a careful study of the facts of the case and the law involved , your claim for refund cannot be granted by this Office . As a duly registered co- operative , you claim exemption from income tax under the provisions of Republic Act No . 2023, approved on June 22 , 1957 which provides that if the net assets during t he taxable year of a coopera- tive are not in excess of Five Hundred Thousand Pesos , (~500 , 000 . 00 ) the same is exempt from income tax. However , the records of this Office show that your other claim for refund of ~39 , 390 . 50 representing alleged erroneously paid fixed , per- centage and residence taxes , was de- nied by this Office in our letter dated November 23, 1965, copy enclosed , on the ground that your net assets as of the fiscal years ended March 31, 1957, }'1arch 31 , 1958 and ~'1arch 31 , 1959, were more than ~5oo , ooo.oo . Consequent- ly ? under the provisions of Section 66 ( 1J (a) of the said law, you are not en- titled to exemption from income tax for the fiscal year ended ?-lar ch 31, 1958 . In view thereof , your claim for refund of ~6 , 886 . 00 is hereby denied. (p. 9, CTA rec . ) Respondent ' s letter of April 29 , 1966, was received by petitioner on Nay 25, 1966 , whereupon the latter filed the present petition for review on June 16, 1966 .

RESOLUTION - CTA CASE NO . 1770 5 Under the foregoing facts it is clear that the two-year period within which to file an action in court for refund of taxes erroneously or il- legally collected provided in section 30 of the Revenue Code had long elapsed when the pr esent petition for review was filed. Petitioner however contends that sections 306 and 309 of t he Revenue Code are not applicable to this case be cause t he case at bar is not an "original action" but an "appeal" and as such it should be governed solely by se ctions 7 and 11 of Republic Act No. 11 25 which provides for an appeal to the Court of Tax Appeals within thirty days . In answer to this contention we cannot do any better than quote the f ollowing language of the Supreme Court in Gibbs and Gibbs v~ Collector of Internal Revenue , et al., G.R. No . L-13453 , Feb . 29 , 1960 , 60 O. G. (2) P � 185: Under the above ruling , it is clear that Section 306 of the Na- tional Internal Revenue Code should be construed together with Se ction 11 of Republic Act No . 1125 . In fine , a taxpayer who has paid the tax , whether under protest or not , and who is claiming a refund of the same , must comply with the require- ments of both sections , t hat is , he must file a claim for refund with the Collector of Inter nal Revenue within 2 years fro m the date of his payment of the tax , as requir ed by said Sec- tion 306 of the National Internal

' HESOLUTION - CTA CASE NO . 1770 6 Revenue Code, and appeal to the Court of Tax Appeals within 30 days from receipt of the Collector's decision or ruling denying his claim for re- fund , as required by said Section 11 of Republic Act No. 1�1 25 . If , however , the Collector takes time in deciding t ne claim, and the period of two years is about to end, the suit or proceeding must be started in the Court of Tax Appeals before the end of the two- year period without await- ing the decision of the Collector . This is so because of the positive requirement of Section 306 and the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed by the statute . In the case of a taxpayer who has not yet paid the tax and who is protesting the assessment made by the Collector of Internal Revenue , he must file his appeal with the Court of Tax Appeals within 30 days from his receipt of the Collector ' s assessment, as required by said Sec- tion 11 of Republic Act No . 1125. Otherwise , his failure to comply with said statutory requirement would bar his appeal and deprive the Court of 'I'ax Appeals of its jurisdiction to entertain or determine the same . \I tHEREFORE, the petition is hereby dismissed . With costs . qOe OBDEREDJi , f! Quezon City , December 7 , 1970. r!Zw--. 'i ~. RAHON L. AVANCENA - Associate Judge \VB CONCUR: